An Update on Self Regulation in the Oil Drilling Industry

Less than two years after the Deepwater Horizon blowout, President Obama has called for his Administration to open “more than 75 percent of our potential offshore oil and gas resources,” while cautioning that he would make sure oil companies could contain such a disastrous spill.[1] But the final report from the President’s Oil Spill Commission contained recommendations far broader than improving spill response, and included recommendations for preventing another spill.[2] What has happened to those recommendations?

The Commission’s final report contained many recommendations, including improving self regulation in the oil-drilling industry.[3] Self regulation might sound unusual, but it has helped other industries improve by targeting human error and problems within the safety culture of an organization.[4] The government regulator can then use traditional regulatory methods to focus on regulating the technology and procedures. Two industry self regulators already operating in the United States are Responsible Care[5] and the Institute of Nuclear Power Operations (INPO).[6] INPO provides a forum for lessons learned in the nuclear power plant industry and evaluates each power plant through onsite visits.[7] Responsible Care also provides a forum for lessons learned, but uses third party certifications, publicly-reported metrics, and industry standards to evaluate facilities.[8]

The Commission’s final report primarily recommended that the oil-drilling industry adopt a self regulator similar to INPO, with only the occasional reference to Responsible Care.[9] In response, the oil-drilling industry has taken some steps to develop a self regulator.[10] The American Petroleum Institute (API) initiated the Center for Offshore Safety (the Center), and has opened it up to non-members.[11]

However, unlike the Commission’s apparent recommendations, the Center more closely resembles early Responsible Care than INPO. For example, INPO membership includes all American nuclear power plant operators.[12] Responsible Care membership is voluntary for chemical companies, though mandatory for member companies of the American Chemistry Council.[13] Similarly, membership for the Center is mandatory for API members who operate offshore, but voluntary for non-API members.[14]

The Center’s operational strategy also appears largely similar to that of Responsible Care. To govern members’ behavior, the Center will rely on independent audits built around AP-75,[15] an API management standard created before the Deepwater Horizon incident. [16] Responsible Care also relies on independent auditing to certify compliance with management standards.[17] This is different from the INPO strategy of visiting and evaluating each nuclear power plant, though it may be a necessary difference considering the disparity in scale between the two industries. There are over 60 sites with nuclear power reactors in the United States,[18] but there have been 3,500 production platforms in the Gulf of Mexico since 2001.[19] In addition, the Center’s board contains members from contractors, and service and supply companies in addition to the operators,[20] which might be another necessary change given the prevalence of independent contractors in the oil-drilling industry.[21]

The API and oil-drilling industry have made some progress in creating a self regulator since the Deepwater Horizon accident in the Gulf of Mexico, but it remains to be seen if the Center will be capable of helping to prevent another oil spill if there is a resurgence in offshore drilling.

[4] For example, INPO pressures on senior management to be involved in safety by publicly grading each plant at a ceremony attended by senior executives from across the industry. Joseph V. Rees, Hostages of Each Other: The Transformation of Nuclear Safety Since Three Mile Island, 103-105 (Univ. of Chi. Press, 1994).